Correlation Between Norwegian Air and Ross Stores
Can any of the company-specific risk be diversified away by investing in both Norwegian Air and Ross Stores at the same time? Although using a correlation coefficient on its own may not help to predict future stock returns, this module helps to understand the diversifiable risk of combining Norwegian Air and Ross Stores into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Norwegian Air Shuttle and Ross Stores, you can compare the effects of market volatilities on Norwegian Air and Ross Stores and check how they will diversify away market risk if combined in the same portfolio for a given time horizon. You can also utilize pair trading strategies of matching a long position in Norwegian Air with a short position of Ross Stores. Check out your portfolio center. Please also check ongoing floating volatility patterns of Norwegian Air and Ross Stores.
Diversification Opportunities for Norwegian Air and Ross Stores
0.34 | Correlation Coefficient |
Weak diversification
The 3 months correlation between Norwegian and Ross is 0.34. Overlapping area represents the amount of risk that can be diversified away by holding Norwegian Air Shuttle and Ross Stores in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Ross Stores and Norwegian Air is a relative statistical measure of the degree to which these equity instruments tend to move together. The correlation coefficient measures the extent to which returns on Norwegian Air Shuttle are associated (or correlated) with Ross Stores. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Ross Stores has no effect on the direction of Norwegian Air i.e., Norwegian Air and Ross Stores go up and down completely randomly.
Pair Corralation between Norwegian Air and Ross Stores
Assuming the 90 days trading horizon Norwegian Air Shuttle is expected to under-perform the Ross Stores. In addition to that, Norwegian Air is 2.12 times more volatile than Ross Stores. It trades about -0.04 of its total potential returns per unit of risk. Ross Stores is currently generating about 0.07 per unit of volatility. If you would invest 14,410 in Ross Stores on August 25, 2024 and sell it today you would earn a total of 335.00 from holding Ross Stores or generate 2.32% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Very Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
Norwegian Air Shuttle vs. Ross Stores
Performance |
| Timeline |
| Norwegian Air Shuttle |
| Ross Stores |
Norwegian Air and Ross Stores Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Norwegian Air and Ross Stores
The main advantage of trading using opposite Norwegian Air and Ross Stores positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Norwegian Air position performs unexpectedly, Ross Stores can make up some of the losses. Pair trading also minimizes risk from directional movements in the market. For example, if an entire industry or sector drops because of unexpected headlines, the short position in Ross Stores will offset losses from the drop in Ross Stores' long position.| Norwegian Air vs. Samsung Electronics Co | Norwegian Air vs. Samsung Electronics Co | Norwegian Air vs. Hyundai Motor | Norwegian Air vs. Toyota Motor Corp |
| Ross Stores vs. Samsung Electronics Co | Ross Stores vs. Samsung Electronics Co | Ross Stores vs. Hyundai Motor | Ross Stores vs. Toyota Motor Corp |
Check out your portfolio center.Note that this page's information should be used as a complementary analysis to find the right mix of equity instruments to add to your existing portfolios or create a brand new portfolio. You can also try the Equity Analysis module to research over 250,000 global equities including funds, stocks and ETFs to find investment opportunities.
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